Investor Relations Presentation Q3 2017 - Fortis Inc. · 2017. 10. 3. · (1) Represents capital...

Investor Relations Presentation

Q3 2017

FORTIS INC. WIRED FOR GROWTH

Forward-Looking Information

2

Fortis Inc. (“Fortis” or, the “Corporation”) includes “forward-looking information” in this presentation within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (collectively referred to as “forward-looking information”). Forward-looking information included in this presentation reflects the expectations of Fortis management regarding future growth, results of operations, performance, business prospects and opportunities. Wherever possible, words such as “anticipates”, “believes”, “budgets”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “might”, “plans”, “projects”, “schedule”, “should”, “target”, “will”, “would” and the negative of these terms and other similar terminology or expressions have been used to identify forward-looking information, which includes, without limitation: the expectation of regulatory stability in the near-term; the Corporation’s consolidated and segmented forecast midyear rate base for 2017 and the period 2017 through 2021 and associated compound annual growth rate; targeted average annual dividend growth through 2021; the Corporation’s forecast gross consolidated and segmented capital expenditures for 2017 and the period 2017 through 2021; the nature, timing and expected costs of certain capital projects including, without limitation, the ITC Multi-Value Regional Transmission Projects and 34.5kV to 69kV Conversion Project, the Central Hudson Gas Main Replacement Program, the FortisBC Lower Mainland System Upgrade and expansion to Tilbury 1A, the FortisAlberta Pole Management Program, and additional opportunities beyond the base plan including, without limitation, the Lake Erie Connector, the WataynikaneyapProject and the pipeline expansion to the Woodfibre liquid natural gas site; the expectation that capital expenditures will exceed expectations; and the expected timing of filing of regulatory applications and receipt and outcome of regulatory decisions.

Forward-looking information involves significant risk, uncertainties and assumptions. Certain material factors or assumptions have been applied in drawing the conclusions contained in the forward-looking information. These factors or assumptions are subject to inherent risks and uncertainties surrounding future expectations generally, including those identified from time-to-time in the forward-looking information. Such risk factors or assumptions include, but are not limited to: uncertainty regarding the outcome of regulatory proceedings of the Corporation’s utilities and the expectation of regulatory stability; no material capital project and financing cost overrun related to any of the Corporation’s capital projects; sufficient human resources to deliver service and execute the capital program; the Board of Directors exercising its discretion to declare dividends, taking into account the business performance and financial conditions of the Corporation; risk associated with the impact of less favorable economic conditions on the Corporation’s results of operations; no significant changes in laws and regulations that may materially negatively affect the Corporation and its subsidiaries; currency exchange rates and resolution of pending litigation matters. Fortis cautions readers that a number of factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking information. These factors should be considered carefully and undue reliance should not be placed on the forward-looking information. For additional information with respect to certain of these risks or factors, reference should be made to the continuous disclosure materials filed from time to time by Fortis with Canadian securities regulatory authorities and the Securities and Exchange Commission. Fortis disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Unless otherwise specified, all financial information referenced is in Canadian dollars.


Fortis Today

3

• Leader in the North American regulated electric and gas utility business

• ITC provides strong platform in electric transmission sector

• Tremendous economic, geographic and regulatory diversity

• Recent regulatory outcomes provide stability for near term

• Visible growth provided by base 5-year capital program

• Pursuing several additional energy infrastructure opportunities

• Consistent dividend growth and superior long-term returns to shareholders

3


A Leader in North American Utility Industry

4

• Regulated utilities• 9 U.S. states• 5 Canadian provinces• 3 Caribbean countries

• ~8,400 employees• 2017F midyear rate base ~$26B• ~30% of rate base regulated by FERC (ITC rate base)• Market cap $19.0B(1)

• Listed on TSX/ NYSE Turks and Caicos Islands

Regulated Electric

Regulated Gas

CaymanIslands

NewfoundlandPrince Edward

IslandAlberta

British Columbia

Arizona

Ontario

New York State

FERC-Regulated Electric Transmission

Oklahoma

KansasMissouri

MichiganIowa

Illinois

A Fortis Company

(1) Market capitalization as of July 31, 2017.

Belize

Long-Term Contracted Hydro Generation

Minnesota


Electric Canada

20%

Gas Distribution-Canada

13%

Electric & Gas US

27%

FERC Transmission –

ITC29%

Electric Caribbean

4%

U.S.56%

Canada33%

7%

5

Highly Diversified: Economic, Geographic and Regulatory Diversification Fortis Has Become a Leading Transmission & Distribution Business

Pro Forma Net Earnings(1)

For the Twelve MonthsEnded June 30, 2017

Fortis 2017 Midyear Rate Base(2)

~$26 BillionTransmission & Distribution represents ~86% of rate base

Regulated-US Electric

& Gas24%

Regulated-Independent Transmission

(ITC)29%

Regulated-Canadian & Caribbean(2)

47%

(1) Excluding ITC’s one-time merger-related expenses, “Corporate and Other” segments and intercompany eliminations.(2) Includes 100% of the Waneta Hydroelectric Expansion of which Fortis has a 51% controlling ownership interest.

Other Energy Infrastructure


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Dividend payout ratio(1)

47%

59%

64%

68%

61%

70% 70%73% 73%

66% 66%

Average Annual Dividend Growth Target of ~6% through 2021

6

$0.67$0.82

$1.00 $1.04 $1.12 $1.16 $1.20 $1.24 $1.28$1.40

Dividend paid per common share

Average annual dividend growth through 2021 targeted at ~6%

$1.53

43 Consecutive Years of Annual Dividend Payment Increases

(1) Dividend payout ratio for 2011 through 2016 adjusted for non-recurring items


Delivering Superior Shareholder Returns

• Average annualized total shareholder return over last 5 years (1)

Fortis 10.34%

S&P/TSX Composite Index 8.55%

S&P/TSX Capped Utilities Index 6.69%

(1) For the 5-year period ending July 31, 2017.


Our Strategic Focus Delivers Results

7

StrategyLeverage the operating model, footprint of our utilities, operating expertise, reputation

and financial strength to develop growth opportunities

Execute Utility CAPEX

Plan

Target Additional

Energy Infrastructure

Increase Renewables

Enhance Customer & Regulatory

Relationships

Unlock LNG Value

Utility Acquisitions

Strategic Initiatives

Dividend Growth Target: 6% Average Annual

Growth Through 2021

Investment-Grade Credit Ratings

Dividend Growth Target: 6% Average Annual

Growth Through 2021


ITC: Transformational Growth for Fortis

8

Accretive to EPS

Financing complete

Integration on tracko Minimal impact on day-to-day operations at ITCo ITC’s new board of directors formedo Linda Apsey appointed President and CEO of ITC during Q4 2016o Joe Welch elected to Fortis’ Board of Directors in 2017


Our Focused Strategy Continues to Yield Strong Results

10

Focused on base growth while making prudent investments to provide safe, reliable

and cost effective energy solutions to our customers

Benefitting from the acquisition of ITC

Maintaining constructive regulatory relationships:

• UNS rate case settlement

Highly executable, low risk capital plan remains on track


2016 – 2021 Midyear Rate Base

2016A 2017F 2018F 2019F 2020F 2021F

Regulated - Canadian & Caribbean Electric & GasRegulated - US Electric & GasRegulated - Independent Electric Transmission (ITC)

2017F 2018F 2019F 2020F 2021FOther Energy InfrastructureRegulated - Canadian & Caribbean Electric & GasRegulated - US Electric & GasRegulated - Independent Electric Transmission (ITC)

Capital Plan Grows Rate Base to ~$30 Billion in 2021

~$13B Five-Year Capital Program

($ b

illio

ns )

(1)

$3.1$2.9

$2.4 $2.4 $2.3 $24.3 $25.7$27.1 $28.3 $28.9 $29.6

(2)

(4)

($ b

illio

ns )

(1)

Midyear Rate Base Sensitivities 3-Year CAGR to 2019 5-Year CAGR to 2021Capex at ~$3B for all years +30 bps to 5.5% +90 bps to 4.9%Add $1 billion in rate base in the last year +130 bps to 6.5% +70 bps to 4.7%

(3)

11

(1) US Dollar-denominated CAPEX and midyear rate base converted at a USD/CAD exchange rate of 1.30 for 2017 through 2021.(2) Includes the impact of bonus depreciation and excludes construction work in progress.(3) Reflects actual midyear 2016 rate base compared to the November 2016 forecast of $24.2 billion.(4) Includes 100% of the Waneta Expansion, of which Fortis has a 51% controlling ownership interest.


Sustaining Capital Expenditures

52%Customer Growth

33%

Utility Operations (4)

15%

5-Year Capital Forecast Spending

Highly Executable Capital Plan

$millions(1) (2) Forecast2017

Forecast2018-2021

Total 2017-2021

Forecast

ITC Multi-Value Regional Transmission Projects (3) 305 244 549

ITC 34.5 kV to 69 kV Conversion Project 89 369 458

FortisBC Lower Mainland System Upgrade 200 182 382

Central Hudson Gas Main Replacement Program 33 169 202

FortisAlberta Pole-Management Program 43 53 96

FortisBC Tilbury LNG Facility Expansion – Tilbury 1A 65 - 65

(1) Represents capital asset expenditures, including both the capitalized debt and equity components of AFUDC, where applicable.(2) US Dollar denominated CAPEX converted at a USD/CAD exchange rate of 1.30 for 2017 through 2021.(3) Consists of four separate multi-value projects to create a stronger connection within the Midwestern United States, improve transmission capacity and to connect wind energy.(4) Includes facilities, equipment, vehicles, information technology and other assets.

Major Capital Projects

12


Opportunities Beyond Base Plan

13

Prince Edward

Island

Ontario

Arizona

British Columbia

Turks and Caicos Islands

Regulated Electric

Regulated Gas

CaymanIslands

Newfoundland and Labrador

Prince Edward IslandAlberta

British Columbia

Arizona

Ontario

New York

FERC Regulated Electric Transmission

Oklahoma

KansasMissouri

MichiganIowa

Illinois

FortisOntario: Wataynikaneyap Project & Municipal Utility Consolidation

ITC: Lake Erie Connector

FortisBC:Tilbury, Woodfibre LNG, Gas Infrastructure

UNS Energy:Renewables & Gas-fired generation

ITC: Mexico Transmission Projects

Minnesota

Long-Term Contracted Hydro Generation

Belize


Opportunity to connect remote First Nations communities in Northern Ontario to the grid

In Q1 2017, the Ontario Energy Board issued its deferral account approval allowing recovery of spending that occurred since November 2010

Federal Government announced in August 2017 up to $60 million in funding to connect Pikangikum First Nation to the power grid with construction to commence in October 2017

Construction will begin following the receipt of permitting, approvals and a cost-sharing agreement between the federal and provincial governments

Potential pipeline expansion to the Woodfibre LNG export site

Earliest expected in service date is late 2020

Proposed 1,000 MW, bi-directional, high-voltage direct current transmission underwater line connecting the Ontario energy grid to the PJM energy market

In May 2017, ITC completed the major permit process in Pennsylvania upon receipt of two required permits from the Pennsylvania Department of Environmental Protection, and in June approval was received from Canada's Governor in Council and the Certificate of Public Convenience and Necessity was issued by the National Energy Board

Beyond the Forecast: Development Project Update

Woodfibre LNG

Lake Erie Connector

Wataynikaneyap Power Project

14


Poised to Deliver Quality Results

• On track to execute 2017 plan, supported by acquisition of ITC and reasonable rate case outcome at UNS

• Consistent dividend growth• 43 years of consecutive dividend increases• 6% average annual dividend growth guidance through 2021

• Highly diversified regulated utilities, focused on wires and gas businesses

• Highly executable, risk-adjusted base capital plan

• Regulatory stability

• Strong organic growth potential in existing businesses

• Track record of superior shareholder returns

15

Appendix


Appendix Table of Contents

Utilities Overview:

17

ITC Holdings Corp. 19

UNS Energy 20

Central Hudson 21

FortisBC 22

FortisAlberta 23

Eastern Canadian Regulated Electric Utilities 24

Caribbean Regulated Electric Utilities 25

Fortis Delivers Strong Q2 2017 Results 26

Q2 2017 Results by Segment 27

June YTD Results by Segment 28

Investment-Grade Credit Ratings and Ample Liquidity 29

Manageable Debt Maturities 30

Financial Strength:


Appendix Table of Contents

Other:

18

Regulatory Stability 31

2017-2021 Five-Year Forecast by Segment 32

Capital Expenditures Exceeding Expectations 33

Predictable Returns from Highly Regulated Asset Base 34

Utility Debt Credit Ratings 35

Operational Highlights 36

Expected Upcoming Events 37

Executive Team 38


ITC Holdings Corp.Largest US independent transmission company

19

ITC Holdings Corp.

Type of utility Transmission

Regulator FERC

Regulatory model Independent Transmission Company

2017 Formula 10.32-11.35% ROE on 60% equity

2017F Midyear Rate Base $7.3B

5-Year CAGR on Midyear Rate Base (1) 4.9%

2016 Assets % of total regulated assets (2) 39%

2016 Pro Forma Earnings (3) $352M

2016 Pro Forma Earnings % of total regulated pro forma net earnings 33%

Major Capital Projects Multi-Value Regional Transmission Projects (“MVPs”)and 34.5 to 69 kilovolt Conversion Project

Development Opportunities (4) Lake Erie Connector and Mexico Transmission Projects

Pending Regulatory Decisions Second MISO Base ROE Complaint

(1) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(2) Includes goodwill.(3) Assumes full year of earnings converted at a USD/CAD exchange rate of 1.33, represents the Corporation’s 80.1%

controlling interest in ITC, excludes one-time merger-related expenses and includes consolidated purchase price accounting adjustments. Earnings from October 14, 2016, the date of acquisition were $59 million.

(4) Development opportunities are not included in the base capital forecast and would represent incremental capital spending.


UNS Energy

20

(1) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(2) Includes goodwill.(3) Development opportunities are not included in the base capital forecast and would represent incremental capital spending.

Tucson Electric

UNS Electric

UNS Gas

Type of utility Electricity Electricity Gas distribution

Regulator Arizona Corporation Commission

Regulatory model Cost of service/Historical Test Year

2017 Formula 9.75% ROE on 50% equity

9.5% ROE on 52.83% equity

9.75% ROE on 50.8% equity




2016 Earnings $199M

2016 Earnings % of total regulated pro forma net earnings 20%

Development Opportunities (3) Renewables and Gas-Fired Generation Opportunities


Central Hudson

21

(1) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(2) Includes goodwill.

Central Hudson Gas and Electric

Type of utility Gas and electricity

Regulator NY State Public Service Commission

Regulatory model Cost of service on future test year

2017 Formula 9% ROE on 48% equity




2016 Earnings $70M

2016 Earnings % of total regulated pro forma net earnings 7%

Major Capital Projects Gas Main Replacement Program


FortisBC

22

(1) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(2) Includes goodwill.(3) Development opportunities are not included in the base capital forecast and would represent incremental capital spending.

FortisBC

Type of utility Gas distribution Electricity

Regulator BC Utilities Commission BC Utilities Commission

Regulatory model Cost of service + PBR Cost of service + PBR

2017 Formula 8.75% ROE on 38.5% equity 9.15% ROE on 40.0% equity

2017F Midyear Rate Base $4.1B $1.3B

5-Year CAGR on Midyear Rate Base (1) 4.4% 2.7%

2016 Assets % of total regulated assets (2) 13% 5%

2016 Earnings $151M $54M

2016 Earnings % of total regulated pro forma net earnings

14% 5%

Major Capital Projects Tilbury LNG Facility Expansion and Lower Mainland System Upgrade N/A

Development Opportunities (3)

Woodfibre LNG, Tilbury further expansion and additional gas infrastructure opportunities

N/A


FortisAlberta

23

(1) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(2) Includes goodwill.

FortisAlberta

Type of utility Electricity distribution

Regulator Alberta Utilities Commission

Regulatory model PBR

2017 Formula 8.5% on 37% equity




2016 Earnings $121M

2016 Earnings % of total regulated proforma net earnings 11%

Major Capital Projects Pole-Management Program

Pending Regulatory Decisions PBR Next Generation Application


Eastern Canadian Regulated Electric Utilities

24

(1) Includes three electric utilities: Canadian Niagara Power, Cornwall Electric and Algoma Power.(2) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(3) Includes goodwill.(4) Development opportunities are not included in the base capital forecast and would represent incremental capital spending.

FortisOntario (1) Maritime Electric Newfoundland Power

Type of utility Electricity Electricity Electricity

Regulator Ontario Energy Board Island Regulatory and Appeals Commission

Newfoundland and Labrador Board of Commissioners of Public Utilities

Regulatory model Cost of service with incentives Cost of service on future test year Cost of service on future test year

2017 Formula 9.19% - 9.30% on 40% equity 9.35% ROE on 40% equity 8.50% ROE +/- 50 bp on 45% equity

2017F Midyear Rate Base $0.3B $0.4B $1.0B

5-Year CAGR on Midyear Rate Base (2) 3.9% 2.6% 2.8%

2016 Assets % of total regulated assets (3) 1% 1% 3%

2016 Earnings $12M $12M $40M

2016 Earnings % of total regulated pro forma net earnings 1% 1% 4%

Development Opportunities (4) Wataynikaneyap Power Project N/A N/A


Caribbean Regulated Electric Utilities(1)

25

Caribbean Utilities Fortis Turks & Caicos

Type of utility Electricity Electricity

Regulator Electricity Regulatory Authority Government of the Turks and Caicos Islands

Regulatory model Cost of service with historical test year Cost of service with historical test year

2017 Formula 6.75-8.75% Return on Assets 15-17.50% Return on Assets

2017F Midyear Rate Base $0.6B $0.4B

5-Year CAGR on Midyear Rate Base (2) 3.0% 4.8%

2016 Assets % of total regulated assets (3)2% 1%

2016 Earnings $20M $18M

2016 Earnings % of total regulated pro forma net earnings 2% 2%

(1) Fortis has an approximate 60% controlling interest in Caribbean Utilities Company, Ltd. Excludes earnings from Fortis’ 33% ownership interest totaling $8 million, or 1% of total regulated operating earnings.(2) 5-Year CAGR on midyear rate base includes 2016 actuals to 2021 forecast.(3) Includes goodwill.


$1.13

$1.31

1.00

1.10

1.20

1.30

1.40

2016 2017

Fortis Delivers Strong Q2 2017 Results

26

$319

$540

100

200

300

400

500

600

2016 2017

Adjusted Earnings Adjusted EPS

Q2

$0.45

$0.61

0.00

0.25

0.50

0.75

2016 2017($

)

($ m

illio

ns)

June Year-to-Date Q2

$129

$253

0

100

200

300

2016 2017

June Year-to-Date


Q2 2017 Results by Segment

27

Second Quarter Variance Analysis by Segment

($’s in millions, excluding EPS)

Q2 2017 Adjustment Q2 2017 (Adjusted)

Q2 2016 Adjustment Q2 2016 (Adjusted)

Q2 (Adjusted)Variance

Regulated – Independent Electric TransmissionITC Holdings Corp. 93 - 93 - - - 93

Regulated – US Electric & GasUNS Energy 89 (4) 85 56 - 56 29Central Hudson 10 - 10 12 - 12 (2)

99 (4) 95 68 - 68 27

Regulated Canadian & Caribbean Electric & GasFortisBC Gas 6 - 6 8 - 8 (2)FortisAlberta 31 - 31 30 - 30 1FortisBC Electric 16 - 16 15 - 15 1Eastern Canadian &Caribbean 27 - 27 27 - 27 -

80 - 80 80 - 80 -


25 - 25 19 - 19 6

Corporate and Other (40) - (40) (60) 22 (38) (2)Net Earnings $257 ($4) $253 $107 $22 $129 $124Weighted Average Shares 416.8 416.8 416.8 283.7 283.7 283.7 133.1

EPS $0.62 $(0.01) $0.61 $0.38 $0.07 $0.45 $0.16


June YTD 2017 Results by Segment

28

June Year-to-Date Variance Analysis by Segment

($’s in millions, excluding EPS)

June YTD 2017

Adjustment June YTD 2017

(Adjusted)

June YTD 2016

Adjustment June YTD 2016

(Adjusted)

June YTD (Adjusted)Variance

Regulated – Independent Electric TransmissionITC Holdings Corp. 184 - 184 - - - 184

Regulated – US Electric & GasUNS Energy 130 (11) 119 68 11 79 40Central Hudson 33 - 33 36 - 36 (3)

163 (11) 152 104 11 115 37

Regulated Canadian & Caribbean Electric & GasFortisBC Gas 103 - 103 100 - 100 3FortisAlberta 56 - 56 61 - 61 (5)FortisBC Electric 31 - 31 30 - 30 1Eastern Canadian &Caribbean 53 - 53 55 - 55 (2)

243 - 243 246 - 246 (3)


48 - 48 30 - 30 18

Corporate and Other (87) - (87) (111) 39 (72) (15)Net Earnings $551 ($11) $540 $269 $50 $319 $221Weighted Average Shares 411.5 411.5 411.5 283.0 283.0 283.0 128.5

EPS $1.34 ($0.03) $1.31 $0.95 $0.18 $1.13 $0.18


Investment-Grade Credit Ratings and Ample Liquidity

Credit Ratings(1)

29

Fortis Inc.

DBRS BBB (high)

S&P A- / BBB+

Consolidated Credit Facilities

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Dec 31/16 June 30/17

Utilized Remaining Capacity

3.74.0

($ b

illio

ns)

2.2 1.4

Moody’s Baa3

(1) In October 2016, following the completion of the acquisition of ITC, DBRS revised the Corporation’s unsecured debt credit rating to BBB(high) from A(low) and revised its outlook to stable from under review with negative implications. In September 2016, Moody’s assigned to Fortis, with a stable outlook, a Baa3 issuer and Baa3 senior unsecured debt credit ratings. In May 2017, S&P and DBRS affirmed the Corporation’s long-term corporate and unsecured debt credit ratings.

(2) Included $500 million non-revolving term senior unsecured equity bridge credit facility, used to finance a portion of the cash purchase price of the acquisition of ITC, which facility was repaid in March 2017.

(2)


Manageable Debt MaturitiesAverage Annual fixed-term debt maturities & repayments over the next five years ~$730M (1)

30

-

500

1,000

1,500

2,000

2,500

3,000$M

Subsidiary Corporate

$M 2017 2018 2019 2020 2021 5-YR Total

Canadian Regulated Electric 6 74 7 36 135 258

Canadian Regulated Gas - - - - - -

U.S. Regulated 160 1,057 347 461 499 2,524

Other Segments 6 26 16 31 33 112

Corporate 2 2 119 164 1,172 1,459

5-YR Total 174 1,159 489 692 1,839 4,353(1) As at June 30, 2017


Regulatory Stability

Recent Regulatory Outcomes

31

Remaining Significant Regulatory Decisions

Regulated Utility Application/Proceeding Filing Date Expected Decision

ITC Second MISO Base ROE Complaint ‒ Not applicable To be determined

Central Hudson

Rate case filing to request an increase in the allowed ROE to 9.5% from 9.0% and equity component of capital structure to 50% from 48%

‒ July 28th June 2018

Regulated Utility Application/Proceeding Outcome Agreement/ Decision Timing

ITC Initial MISO Base ROE Complaint ‒ 10.32% base ROE with a high-end zone of reasonableness of 11.35% September 2016

FortisBC Energy 2016 Application: ROE and Common Equity Thickness

‒ Maintained ROE at 8.75% and common equity thickness of 38.5% August 2016

FortisAlberta 2016/2017 Generic Cost of Capital Proceeding (GCOC)

‒ ROE maintained for 2016 at 8.30% and increasing to 8.50% for 2017. Common equity thickness reduced from 40% to 37% for 2016 and 2017

October 2016

TEP 2017 General Rate Application (GRA)‒ Decision issued approving settlement agreement

on revenue requirement‒ 9.75% ROE and common equity thickness of 50%

February 2017


2017-2021 Five Year Forecast by Segment

2017 Capital Forecast ($millions)Regulated–Independent Transmission (ITC)ITC 958Regulated-US Electric & GasUNS Energy 579Central Hudson 230Regulated-Canadian & Caribbean Electric & GasFortisBC Gas 489FortisAlberta 419FortisBC Electric 118Eastern Canadian 165Caribbean 115Other Energy Infrastructure 23Total Capital 3,096

$millions 2017 2018 2019 2020 2021Regulated – Independent Transmission (ITC) $958 $872 $590 $619 $616

Regulated – US Electric & Gas 809 693 830 825 671

Regulated – Canadian & Caribbean Electric & Gas 1,306 1,244 970 955 958

Other Energy Infrastructure 23 50 27 8 8

Total Capital Expenditures $3,096 $2,859 $2,417 $2,407 $2,253

32

Fortis 2017 Midyear Rate Base(1)

~$26 BillionTransmission & Distribution represents ~86%

of rate base

Regulated-US Electric & Gas

24%

Regulated-Independent Transmission

(ITC)29%

Regulated-Canadian & Caribbean(1)

47%

(1) Includes 100% of the Waneta Hydroelectric Expansion of which Fortis has a 51% controlling ownership interest.


Capital Expenditures Exceeding Expectations

33

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2013 2014(1) 2015(1) 2016(1)(4) 2017(2)(4)0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2015 2016(4) 2017F(3)(4) 2018F(3)(4) 2019F(3)(4)0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2014(1) 2015(1) 2016(1)(4) 2017(2)(4) 2018F(2)(4)

2013-2017 Business Plan Capex 2014-2018 Business Plan Capex 2015-2019 Business Plan Capex

(1) Acquisition capex relates to UNS Energy acquired in August 2014. (2) Acquisition capex relates to UNS Energy acquired in August 2014 and capex from Aitken Creek effective April 1, 2016.(3) Acquisition capex relates to Aitken Creek acquired April 1, 2016.(4) ITC capex relates to capex contribution from ITC following acquisition in October 2016.

Acquisition Capex (1)(2)(3)5-YR Plan Actual (Adjusted) / Current Forecast ITC Acquisition

$ Millions $ Millions $ Millions


Predictable Returns From Highly Regulated Asset Base

34

PBR through 2019Allowed/Achieved 2016 ROE (%): 8.75/9.28(gas), 9.15/9.38(electric) Allowed 2017 ROE (%): 8.75-9.15

Allowed Equity in Capital (%): 38.5-40

PBR through 2022Allowed/Achieved 2016 ROE (%): 8.30/9.70

Allowed 2017 ROE (%): 8.50Allowed Equity in Capital (%): 37

Future Test YearAllowed/Achieved 2015 ROE (%): 8.80/8.98

Allowed 2016 ROE (%): 8.50Equity in Capital (%): 45

Future Test YearAllowed/Achieved 2016 ROE (%): 9.00/9.98

Allowed 2017 ROE (%): 9.00Allowed Equity in Capital (%): 48

Historic Test YearAllowed/Achieved 2016 ROE (%): 10.0/8.20 (TEP)

Allowed 2017 ROE (%): 9.50-9.75Allowed Equity in Capital (%): 50-52.8

43%

38%

16%

3%

ElectricTransmission- ITCGasNon-Regulated Energy Infrastructure

as at June 30, 201797% Regulated Assets

2017

Weighted Average Canada U.S. Combined

Allowed ROE 8.73 10.50 9.75

Actual Equity Thickness 39.0 55.1 48.2

FERC RegulatedForward Looking Rate Construct with True-Up

Allowed/Achieved 2016 ROE (%): 11.32-13.88/12.65Allowed 2017 ROE (%): 10.32-11.35

Allowed Equity in Capital (%): 60


Utility Debt Credit Ratings

35

Company S&P DBRS Moody’s

ITCTransmission A n/a A1

Michigan Electric Transmission Company (METC)

A n/a A1

ITC Midwest A n/a A1

ITC Great Plains A n/a A1

Tucson Electric Power A- n/a A3

Central Hudson A- n/a A2

FortisBC (Gas) n/a A A3

FortisBC (Electric) n/a A (low) Baa1

FortisAlberta A- A (low) n/a

Newfoundland Power n/a A A2


Operational Highlights

Regulated(as at June 30, 2017) Q2 2017 2017F

Customers Total Assets($B)

Peak Demand VolumesGas(PJ)

SalesElectric(GWh)

NetEarnings

($M)

MidyearRate Base

($B)

Capital Program

($M)UTILITYElectric

(#)Gas(#)

Employees(#)

Gas(TJ)

Electric(MW)

ITC(1) N/A - 668 17.9 - 21,963 - N/A 184 7.3 958

UNS Energy 518,000 155,000 2,040 8.7 105 3,378 8 7,002 130 4.7 579

Central Hudson 300,000 80,000 992 3.1 126 1,018 13 2,378 33 1.6 230

FortisBC 170,000 999,000 2,222 8.3 1,336 536 125 1,657 103 5.4 607

FortisAlberta 551,000 - 1,113 4.2 - 2,725 - 8,534 56 3.2 419

Eastern Canadian 410,000 - 994 2.4 - 1,906 - 4,671 36 1.7 165

Caribbean Electric (2) 44,000 - 374 1.3 - 145 - 411 17 1.0 115

Total Regulated 1,993,000 1,234,000 8,403 45.9 1,567 31,671 146 24,653 590 24.9 3,073

(1)Financial results are from date of acquisition. Highlights represent 100% of ITC except for earnings which represent the Corporation’s 80.1% controlling ownership interest in ITC. (2) Includes 100% of Caribbean Utilities' operations except for earnings, which represent Caribbean Utilities' contribution to consolidated earnings of Fortis based on the Corporation's approximate 60% ownership interest.

Energy Infrastructure(as at June 30, 2017) Q2 2017 2017F

Generating Capacity(MW)

StorageCapacity

(BCF)

Total Assets($B)

Energy Sales(GWh)

Net Earnings($M)

Capital Program($M)

Energy Infrastructure 391 77 1.6 601 48 23

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Expected Upcoming Events

Expected Earnings Release DatesQ3 – 2017 November 3, 2017

Save the Date - 2017 Investor DayToronto October 16, 2017New York October 18, 2017

Barry PerryPresident & CEO

Gary Smith EVP, Eastern Canadian& Caribbean Operations

Nora DukeEVP, Corporate Services & CHRO

Karl SmithEVP, CFO

David HutchensPresident & CEOUNS Energy

James LauritoEVP, Business Development

Michael MulcahyPresident & CEOFortisBC

Karl BomhofPresident & CEOFortisAlberta

David BennettEVP, Chief Legal Officer & Corporate Secretary

Michael MosherPresident & CEOCentral Hudson

Linda ApseyPresident & CEOITC Holdings Corp.

Phonse Delaney EVP, Chief Information Officer

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Investor Relations Presentation Q3 2017 - Fortis Inc. · 2017. 10. 3. · (1) Represents capital...

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Transcript of Investor Relations Presentation Q3 2017 - Fortis Inc. · 2017. 10. 3. · (1) Represents capital...